During periods of crisis, investors often flee risky asset classes and invest in assets or commodities that they feel will hold value. Gold is a prime example.

Gold is relatively rare and it is respected across borders; therefore, unlike currencies, it is believed to hold its value over time. And gold's value isn't just speculation: Historic charts show that gold spiked from about $150 dollars an ounce in the mid-1970s to around $1,600 an ounce in 2011. As fears of volatility took hold in 2011, gold prices skyrocketed. The question is, what's the best way to invest in it? (Think the value of gold is unshakable? Read The Gold Standard Revisited to learn about its rise and fall.)
Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Investing in Gold
While collecting jewelry with a high gold content or gold coins is the method preferred by some, there are downsides to consider. For example, there is the issue of finding a safe place to store such merchandise. Finding a buyer for a particular piece may also be difficult. Plus, there is sometimes a very big markup on certain pieces. The simplest method would be to buy a Gold ETF, such as SPDR Gold Trust ETF (NYSE:GLD) or the iShares Gold Trust ETF (NYSE:IAU).

But there is an alternative for investors who want to gain exposure to gold: the stock market. Check out these five simple gold stock plays.


Company Market Capitalization YTD %Return
Yamana Gold Inc (NYSE:AUY) 10.42B +17.02%
Randgold Resources Limited (Nasdaq:GOLD) 9.12B +24.85%
Franco-Nevada Corporation (NYSE:FNV) 4.77B +12.33%
Royal Gold Inc (Nasdaq:RGLD) 3.93B +30.53%
Allied Nevada Gold Corp (AMEX:ANV) 2.66B +30.5%

The Risks
Investors need to also understand is that the price of gold can fluctuate widely. In 1980, the price of gold had risen to about $850 an ounce, a huge increase given that just a couple of years prior it was trading under $200. But not too long after that spike, gold lost a bit of its luster, and the price floundered until 2005 when interest started to pick up again. As such, investors who purchased at or near the top of the market in the 1980s had to wait about 25 years to recoup their investments. (To learn how to combine technicals and fundamentals to confirm trends in this commodity, read A Holistic Approach To Trading Gold.)

Bottom Line
Investors tend to flock to gold in times of market crisis. Widespread international acceptance and recognition of this circumstance makes it likely that this trend will continue in the future. Adding a little gold to your portfolio might help you mitigate risk; the five stocks presented here are a great starting point for your gold stock search. (For further reading, check out Does It Still Pay To Invest In Gold? and Getting Into The Gold Market.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: iShares US Basic Materials

    Learn about the iShares US Basic Materials exchange-traded fund, which invests in the equities of chemicals, metals and industrial gas companies.
  2. Mutual Funds & ETFs

    ETF Analysis: Ultra Oil & Gas

    Find out more about the ProShares Ultra Oil & Gas exchange-traded fund, the characteristics of the ETF and the suitability and recommendations for the fund.
  3. Mutual Funds & ETFs

    ETF Analysis: PowerShares DB Commodity Tracking

    Find out about the PowerShares DB Commodity Tracking ETF, and explore a detailed analysis of the fund that tracks 14 distinct commodities using futures contracts.
  4. Mutual Funds & ETFs

    ETF Analysis: PowerShares FTSE RAFI US 1000

    Find out about the PowerShares FTSE RAFI U.S. 1000 ETF, and explore detailed analysis of the fund that invests in undervalued stocks.
  5. Mutual Funds & ETFs

    Comparing ETFs Vs. Mutual Funds For Tax Efficiency

    Explore a comparison of mutual funds and exchange-traded funds, or ETFs, and learn what makes ETFs a significantly more tax-efficient investment.
  6. Mutual Funds & ETFs

    ETF Analysis: Vanguard Small-Cap Value

    Find out about the Vanguard Small-Cap Value ETF, and explore detailed analysis of its characteristics, suitability, recommendations and historical statistics.
  7. Mutual Funds & ETFs

    ETF Analysis: Vanguard Intermediate-Term Corp Bd

    Learn about the Vanguard Intermediate-Term Corporate Bond ETF, and explore detailed analysis of the fund's characteristics, risks and historical statistics.
  8. Insurance

    Whole or Term Life Insurance: Which Is Better?

    Learn the difference between term life insurance and whole life insurance. Understand when it is beneficial to buy each type of life insurance.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares 10-20 Year Treasury Bond

    Learn about the iShares 1-20 Year Treasury Bond ETF and its holdings, and understand why investors may be better served to look at other bond funds.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares Global Telecom

    Learn about the iShares Global Telecom exchange-traded fund, which invests in U.S. and foreign telecommunication companies with high dividend yields.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  4. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  5. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  6. Lion economies

    A nickname given to Africa's growing economies.
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  5. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!